Whether your Final Four picks include Blue Chip mega-caps (Duke, Michigan and Kentucky), or low-cap growth stocks (High Point, Cal Baptist and Prairie View A&M) behavioral biases are on full display when tens of millions of Americans fill out their NCAA men’s basketball tournament brackets.

March Madness is not just a three-week basketball-palooza. It is a classic example of the cognitive biases that derail investors year after year.  Here are four of the most egregious ones:

1. Overconfidence Bias

Ask anyone why they picked a certain team to go deep in the tournament and you will get a confident, well-reasoned answer. They watched three games this season. They read a column about the point guard. Their cousin went to that school. The coach is hot right now. They did well last year.

This is overconfidence bias in its purest form — the tendency to overestimate the accuracy of our predictions based on thin or anecdotal evidence. Behavioral economists have documented this bias extensively. Behavioral psychologist, Daniel Kahneman, described how people consistently overestimate the precision of their forecasts, especially in complex systems with many interacting variables.

Basketball, like markets, is exactly that kind of system. A star player rolls his ankle in warmups. An underdog catches fire from three. A referee misses a call. The outcome is partly skill and partly chaos — and yet tens of millions of people fill out brackets with supreme conviction. Yet no one has ever predicted all 67 games correctly in the same year. In fact, out of 36 million brackets completed on the major online sites in the 2026, NOT ONE bracket remained perfect by  the 44^th game of the 67 game tournament. And there are still four rounds to go.

Investors do the same thing. We read a few earnings reports, catch a segment on financial television, and proceed to make high conviction bets on individual stocks. We forget that we are competing against professionals who do this 12 hours a day with resources and computing power we cannot imagine. The bracket reminds us: confidence and competence are not the same thing.

For many years, Warren Buffett offered $1 billion to anyone who could pick a perfect NCAA bracket and never once paid up. Now Kalshi, the prediction market site is made the same $1 billion offer. They already know they won’t have to pay up in 2026.

2. Recency Bias: Why Last Year’s Champion Gets Too Much Love

In bracket psychology, recent events loom far larger than a full body of evidence would justify. The defending champion University of Florida Gators were a No.1 seed in this year’s tournament and a heavy favorite to make the Final Four. Instead, they got knocked out by No.9 seed, University of Iowa in only the second round. University of Nebraska started the season 20-0 and then dropped seven of their last 13 games heading into the post-season. They fell to a No.4 seed and millions of bracketeers overlooked them as a contender. Yet here are the Huskers in the Sweet 16 having just knocked off Vanderbilt, champions of the highly competitive Southeastern Conference.

Recency bias is equally destructive in investing. When markets are rising, investors pile in, assuming the good times will last indefinitely. When they correct, panic selling takes over. We let the last six months of data override twenty years of historical context.

The data on this is sobering. Dalbar’s annual Quantitative Analysis of Investor Behavior consistently shows that average investors dramatically underperform the indices they invest in — not because the funds are bad, but because investors buy high and sell low, chasing recent performance. They are filling out their financial brackets based on last week’s box scores.

3. Confirmation Bias: Rooting for Your Pick to Be Right

Once you have committed to a bracket pick, something strange happens. You start finding evidence that supports it everywhere. TV analyst Charles Barkley calls your team a “sleeper to watch” and it feels like vindication. But when pundit Seth Greenberg questions them, you instantly dismiss his take on your team, even if his argument is stronger. You are no longer evaluating information objectively — you are prosecuting a case for your predetermined conclusion.

Confirmation bias is one of the most dangerous land mines in investing. Once we own a stock, we unconsciously filter news through the lens of ownership. Good earnings confirm our genius. Bad news gets rationalized as temporary. We stop asking “should I own this?” and start asking “why should I continue to own this?” — a subtle but devastating shift.

Before you finalize a bracket pick, read the case for the other team. Before you double down on a position, write out a serious bear case. The goal is not pessimism — it is intellectual honesty.

4. Loss Aversion

Research suggests most people feel the pain of the loss roughly twice as intensely as the joy of a gain. Kahneman called this “loss aversion,” and he showed it is hardwired into our brains from birth.

In March Madness, loss aversion drives people to pick favorites relentlessly, even when the expected value of an upset pick is higher. We protect our bracket’s survival rather than optimizing for winning the pool. We anchor to our initial picks long after they should be reconsidered.

For investors, loss aversion leads to holding losing stocks far too long — hoping to “get back to breakeven” — and selling winners prematurely to lock in gains. Both behaviors sacrifice expected returns in service of emotional comfort. The result is a portfolio shaped more by feelings than by fundamentals.

How March Madness Can Make Us Better Investors

The most successful bracket players — and investors — share a few key traits.

1. They diversify their picks rather than over-concentrating on one narrative.

2. They respect base rates: historically, No. 1 seeds win the national championship more often than all other seeds combined. They manage their downside and stay in the game long enough for their process to pay off.

3. They also know when to trust the structure over the story. The tournament bracket is a process. A well-constructed investment policy statement is a process. Both exist to protect us from ourselves in high-emotion moments.

Before you submit your next bracket or make your next investment decision ask yourself: ”Am I making this pick because the data supports it, or because I watched them play two weeks ago and they outplayed their conference rivals with a better record? Am I buying this stock because I have a thesis, or because everyone on my feed is talking about it?”

Conclusion

March Madness lasts three weeks. The behavioral biases it exposes can last a lifetime. The court just makes it more obvious than a brokerage account does.

#Marchmadness, #NCAAbasketball, #behavioralbias, #investing

Unique advantages for CPAs, financial advisors

Our recent post Why Write a Book generated plenty of comments. One reader asked if it was better to do a print book or a digital book these days. Before answering that question, there’s a third option to consider – an audiobook. With today’s technology, you can convert your existing print book to audio.

When a listener hears your book in your own unique voice, the material becomes more vivid and more personal. It feels like a conversation instead of a presentation. “That is often what high-net-worth clients respond to,” Tina Dietz, CEO of Twin Flames Studios told me recently. “They want to understand not only what you know, but how you think under pressure, how you explain complexity, and how you make important decisions — all critical attributes for financial advisors,” added Dietz.

Audio is also highly portable. Readers can listen to your words of wisdom while exercising, commuting, traveling, gardening or on breaks between meetings. This increases the amount of time they spend with your perspective, which strengthens familiarity with your approach.

“Audio gives financial advisors something print cannot: a leadership signature,” said Dietz. “It’s the sound of how you think and guide clients through complexity. For advisors who already publish regularly, an audiobook isn’t redundant; it’s the next evolution of your thought leadership,” she noted.

Studies show that audio produces 56% better attention and higher brand recall than online video.

Research also shows that audio outperforms other media in attention delivery, especially in mobile environments. One major industry study found that listeners rated long-form audio hosts at the same credibility level as journalists. The broader research also shows that long-form audio builds trust and creates a sense of connection between the speaker and the listener.

“This matters because clients selecting a financial advisor are evaluating temperament, philosophy, and judgment,” said Dietz. “Those qualities show up in your voice before you ever sit down together with a potential client. An audiobook becomes a pre-meeting trust accelerator that speaks for you in rooms that you’re not in yet,” she added.

Studies show that listeners feel a sense of telepresence — an “I’m in the room with you” effect-when the narration is strong. “That emotional connectedness increases positive attitudes toward the narrator,” explained Dietz. “So, when someone spends several hours with your ideas in your voice, they’re not just understanding your philosophy, they’re forming a sense of your judgment, steadiness, and credibility, which is the foundation of trust with high-net-worth families,” Dietz asserted.

Business case for audiobooks

According to Diez, ROI from audiobooks doesn’t come from volume; it comes from fewer but better-aligned clients. As a result, she said audio gives you a disproportionate return on the time invested. “A one-time investment in a premium audiobook gives you a scalable asset that pre-educates and pre-aligns the exact clients you want,” said Dietz. “It reduces early-stage qualification time, strengthens relationships with centers of influence, and positions your thinking as the benchmark in your category long before anyone schedules a meeting.

Connecting with NextGen

According to Dietz, younger adults, which may include next-gen decisionmakers and future inheritors, are driving a massive shift toward audio-first content. Research shows that roughly one-third of adults under 30 listened to an audiobook in the last year, and Gen Z is the fastest-growing segment of audio-only podcast consumers.

If you’re advising multi-gen families or preparing for succession conversations, audio is the medium that the younger cohort prefers for consuming long-form ideas. “An audiobook becomes an asset that speaks in a format they’re more likely to engage with,” said Dietz. “It becomes a powerful tool for continuity planning and long-term influence,” she added.

For advisors who already have a strong reputation, audio becomes a force multiplier. It elevates your presence into environments where you can’t always be in the room, such as corporate board discussions, multi-generational family meetings, COI conversations, and even conferences where your ideas may be shared informally.

Audio also creates a permanent intellectual asset. “Markets change, strategies evolve, but your core philosophy, particularly the way you think and the principles you return to, becomes a lasting part of your professional legacy,” explained Dietz. “That has real value in succession planning and long-term brand equity,” she added.

The most common misconception is that producing an audiobook will be excessively time-intensive or technically overwhelming. Advisors imagine long days in a recording studio or complicated editing sessions. “The reality is the exact opposite,” said Dietz. “With a properly engineered remote-production model, advisors can record in short, manageable blocks, typically from their own office or home,” she said. “A good production partner can handle the entire technical side, including fully directing the recording sessions, capturing the highest quality audio, editing, mastering, and coordinating distribution,” she added.

Conclusion

The production quality should reflect the quality of your practice. The right partner amplifies your brand; the wrong partner dilutes it. Advisors should choose a partner who doesn’t just record audio, but who understands how to translate expertise into presence.

#thoughtleadership, #audiobooks, #practicedevelopment

Maybe because the rest of the world is in such turmoil, the basketball gods gave us an eerily predictable and uneventful NCAA Men’s Basketball Tournament. As we head into the final weekend of “March Madness,” the Final Four remaining teams (Auburn, Duke, Florida and Houston) are each heavily favored No.1 seeds for only the second time in the history of the tournament. It’s like having the four largest cap companies in the S&P 500 outperforming the other 496 names by a large margin all at the same time. It doesn’t happen often.

The annual single-elimination national tournament of college basketball’s 68 best teams is usually filled with wild upsets, heart-wrenching losses and game after game going down to the final seconds in which your favorite team either wins or goes home (season over). No best of seven. No consolation bracket. No do-overs. If you’re a bettor, you need a balanced portfolio of heavy favorites, mid-major standouts and unlikely upstarts to come out ahead. Like the stock market, you just never know which name or sector will get hot at just the right time.

March Madness is the ultimate reality show in which on any given night unheralded Fairleigh Dickinson can end top-ranked Purdue’s season in the first round (2023). University of Maryland Baltimore County (UMBC) can end top-ranked Virginia’s season in the first round (2018). St. Peter’s, a tiny commuter school from Jersey City, NJ can send mighty Kentucky packing in the first round (2022) and then end Purdue’s season in the third round, or Florida Gulf Coast can knock out mighty Georgetown in the first round (2013).

This year’s tournament started out predictably unpredictable in the first round as little- known McNeese State knocked out Clemson; No.12 Colorado State beat No. 5 Memphis; and No. 10 Arkansas beat No. 7 Kansas and then No. 2 St. John’s. But, then the upset gods fell asleep at the wheel and went on vacation early. By the time we got to the Elite Eight teams, we had four No.1 seeds, three No. 2 seeds and one No. 3. Great teams all, but pretty “chalky” as the betting community would say. And not very exciting.

What March Madness teaches us about investing

Despite a more predictable than usual tournament, none of the 34 million brackets filled out on the ESPN and CBS platforms remained perfect after the first two rounds of the six-round tournament.

I bring this up because our collective inability to pick March Madness brackets successfully, despite all the data and analysis available to us free of charge and in real time, highlights many of the behavioral biases that so often derail our investment decisions.

Rory Henry, CFP®, BFA, Director of Arrowroot Family Office and author of the new book Holistic Guide to Wealth Management, told me if you’re looking at your bracket and wondering why you got your hopes up that a “Cinderella” run would bring back the madness, it’s not your fault—”you likely fell victim to one (or many) of the psychological and emotional biases” such as those listed below:

1. Narrative Bias. “We crave stories,” said Henry. “The Cinderellas gave us drama, hope, and belief in the improbable. Without them, we’re left with stats and seedings—logical but less exciting. We’re wired to favor the emotionally compelling over the rational,” he lamented.
2. Recency Bias. Last year’s upsets? “We expect more of the same,” asserted Henry. “But just because it happened recently doesn’t mean it will repeat. Our memories are short, and our expectations are often misaligned with changing realities,” Henry added. Sound familiar investors?
3. Boredom Aversion is perhaps the most overlooked bias according to Henry. “When things play out as expected, we feel let down. We miss the chaos. We crave the underdog even as we fill out our brackets with safe picks. Predictability feels less human—and less fun.”

I might also add “Loss Aversion” in which the pain of a loss is felt at least twice as acutely as the joy of the gain. It doesn’t matter if you’re filling out brackets or balancing your portfolio. Losses hurt….bad.

For more behavioral bias that derail or investing and bracket-picking plans, see

What March Madness Teaches About Our Biases.

“March Madness has always been about the irrational exuberance of college basketball fans,” noted Henry. “This year, it’s teaching us a different lesson: that our love of drama, our reliance on the past, and our resistance to predictability—and yes, our delight in making irrational picks—are what made March Madness so fun in the first place. And maybe, just maybe, we’re learning that true madness isn’t in the upsets—but in how we process what happens when they don’t occur.”

From where I sit, this year’s lack of drama is likely to become the norm rather than the exception, thanks to the Transfer Portal and the new NIL deals that allow players to make money – in the seven figures for top players — from the commercial use of their name, image, and likeness.

“Talent,” said Henry, “is now clustering at big-name programs with deep pockets and brand visibility.” I agree with Henry’s assessment that if you need a skilled point guard, you no longer have to take a chance on 17-year-old high school recruits and wait several years for them to develop in your program. You just go to the transfer portal, search on experienced points guards, and reach out to a proven fourth- or fifth-year player who’s looking for a bigger paycheck at your school. They must no longer sit out a year in order to transfer and wonder if boosters will make good on their under-the-table promises. It’s all out in the open.

And that’s a shame. March Madness has long been the platform for the Weber States, Valparaisos, Gonzagas, Texas Westerns, Butlers, UMBC’s and St. Peters’ to gain national recognition and substantially boost donations and applications. It’s also a chance for the Yales and Princetons of the world to show they can hit the hardwood as hard as they hit the library. Auburn and Arizona learned that the hard way in recent years. Not so this year.

Conclusion

We need those scrapy startups to put the Mega Caps in their place from time to time. Otherwise, we’re just mailing it in and not innovating or getting better. What are you and your colleagues doing to stay hungry and innovative? I’d love to hear from you.

#marchmadness, #innovation, #behavioralfinance

With the first week of the NCAA Men’s Basketball tournament (aka #MarchMadness) in the books, many of you are lamenting your “busted brackets.” Don’t feel bad. An estimated 30 million people painstakingly fill out their tournament picks every year, and there has never been a verified perfect bracket. The closest to perfection came in 2019, when a Columbus, Ohio, resident correctly chose the winners of the first 50 games of the tournament only to see his picks unravel in the Sweet 16 round. For years, billionaire Warren Buffett has offered a $1 billion prize to anyone picking a perfect bracket and he’s never come close to paying out.

Why we can’t predict winners consistently

It turns out our bracket-picking prowess gets clouded by many of the behavioral biases that derail investors. According to my friend Rory Henry @Roryshenry, business development director at Arrowroot Family Office and host of the AFO Wealth Management Forward podcast, here are the five most common biases that trip up bracket pickers and investors:

1. Recency Bias occurs when people give more weight to recent events than historical data. For example, in the Big Ten Conference tournament held just before March Madness, Wisconsin’s surprising victory might lead many to overrate them in the NCAA tournament despite a so-so regular season record. Conversely, Purdue, who many saw as a top overall pick throughout the season stumbled in the Big Ten Conference tournament and caused many bracketologists to remove them from their Final Four selections. If you’re keeping score at home, Purdue cruised through the first two rounds and Wisconsin was bounced in the first round.

2. Affinity Bias refers to our natural inclination to support teams or schools with which we have a personal connection or fondness. As a proud UCLA alum, Henry says he often picks the Bruins to win it all whenever they are in the tournament even if they’re not having a great year.

3. Overconfidence Bias occurs when individuals overestimate their knowledge or predictive abilities, which can lead to flawed decision-making. Watching a lot of college basketball might make someone overly confident in their bracket selections, possibly ignoring the unpredictable nature of the tournament and the potential for upsets.

4. Confirmation Bias is the tendency to search for, interpret, favor, and recall information in a way that confirms one’s preexisting beliefs. In March Madness, if you believe a perennial favorite like Kentucky is a strong contender, and all the pundits say so as well, you might ignore signs of weakness (youth, inexperience, turnovers) that could be exposed against veteran teams in the high-pressure NCAA tournament. No.3 Kentucky was sent home in the first round by No.14 Oakland, a small commuter school outside of Detroit.

5. Intergroup Bias happens when we favor our own group (in-group bias) and the negative evaluation of rival groups (out-group bias). For example, Henry said if you have a strong dislike for a team like Arizona due to its rivalry with UCLA, you might underrate Arizona’s chances in the tournament, not because of their skills or record, but because of the rivalry. Same goes for Duke vs. Carolina, Michigan vs. Ohio State and Oregon vs. Washington. Henry said: “You can bet your bottom dollar Arizona won’t be making past the Round of 32 in my bracket,” but the Wildcats have posted two convincing victories so far and are favored again in the Swett 16.

Then there are the intangibles like team chemistry and culture. As my friend Dan McMahon, Managing Partner of Integrated Growth Advisors (and a diehard UConn Huskies fan) wrote recently:

“While athleticism and recruiting budgets are important, the most successful teams in the tourney year after year are those with strong cultures built on trust, communication, and shared values. On these teams, every member of the roster from the stars to the walk-on benchwarmers are valued and has a unique role on the team.”

As I’ve learned over the years, filling out your brackets is like constructing a diversified investment portfolio. You’re trying to find the right balance between the “safe picks” (the top seeded, blue-chip stocks) and the “upset picks” (the undervalue lower seeds, aka small cap growth stocks) that earn you bonus points and separate you from the other players in your pool. That’s where team culture, like a strong company management and culture can trump financial statements and team stats.

Now, let’s look at how these bracket-picking biases relate to investing:

Recency Bias. Investors believe that last year’s top performing stocks and funds will repeat their success in the current year. In reality, last year’s top performers are usually in the middle or bottom third of the pack the following year. Remember how well tech stocks did in 2022 or how poorly energy did? What a difference a year makes. Same goes for all the bracket pickers going for last year’s Final Four participants San Diego State, Connecticut, Miami and Florida Atlantic. Only UConn and San Diego State remain this year. Miam and Florida Atlantic didn’t even qualify.

Familiarity Bias. It’s amazing how many people pick their alma mater to do well regardless of the team’s record or who else is in its bracket. People also tend to overweight teams that are in their geographic area because they hear about them all the time on the news, or because many family members are alums. The same goes for investors who overweight their portfolios based on the industry in which they work, or Fortune 500 companies located nearby.

The reciprocal of Familiarity Bias is Unfamiliarity Bias. That’s the tendency to ignore promising investments because you’re not familiar with the company or industry – or ignoring promising overseas markets because you’re not familiar with the language or the culture. Same goes for March Madness. West Coast hoops fans are far more likely to overlook East Coast powerhouses like UConn, North Carolina and Marquette, even though both programs have been in the national top 10 and make it to the Big Dance almost every year.

Overconfidence Bias is another derailer for both investors and bracket players. Most pool participants have massive confidence in top-ranked teams. Yet, only once in the history of the tournament (2008) have all four No.1 seeds made it to the Final Four. Some years only one of the four No.1 seeds will make it that far—you never know which one. Same goes for investors who overweight the Magnificent Seven or Dow 30 stocks.

Following the Herd. Oddsmakers love it when the American public stampedes over itself crowding into the same bets. History shows all four No.1 seeds almost never make it to the Final Four in the same year, but once again, those top four rated teams have the most votes to make it to the Final Four this year. And two of those teams (Houston and Purdue) have never won a national title despite years of success. Reminds me of all the investors who continue piling into Nvidia, Amazon, Tesla (and Bitcoin) despite their frothy valuations.

The “Halo Effect” comes into play when investors blindly follow the recommendations or investing choices of gurus such as Bill Gross and Warren Buffet. It’s the same when bracket pickers blindly follow the wonky statistical models of KenPom, 538, and RPI, or blindly pencil in the “sleeper” picks of TV analysts Kenny Smith and Charles Barkley, or former President Obama. As with the stock jockeys on TV, the picks of the expert hoop heads on TV rarely pan out.

Then there’s the fallacy of “breakeven,” a mental accounting trap that has plagued gamblers and investors alike for centuries. How many times have you held on to a losing stock for years, just waiting for it to get back to the original purchase price before you dump it? Likewise, how many people keep selecting BYU (31 tournament appearances without a title); Tennessee (26 appearances without a title); Alabama and Creighton (25 appearances without a title) to go far in the tourney because they have great records again and this time, you tell yourself, it’s finally their year. Or maybe, you tell yourself, it’s the Zags’ year because they’re long overdue for a championship.

Gonzaga University, formerly a little-known “microcap” from eastern Washington is now a mighty mega-cap in the world of college basketball. The Bulldogs have qualified for the NCAA tournament an amazing 25 straight years and have never come close to having a losing season during that span. They have an impressive record again this year. The majority of bracket pickers have the Zags brand penciled in for another deep run in the tournament – because they always do — despite the fact that Gonzaga has never won the championship. EVER.

Conclusion

Whether investing, gambling, or taking part in the friendly office pool, always check your emotions at the door. Working with an objective, independent advisor is one of the best ways we know to prevent your intuitions from causing you to stray from your plan and making costly turnovers that will shake your confidence and derail your plan.

Who’s your pick to win it all and why? I’d love to hear from you and why.

#marchmadness, #behavioralfinance, #bracketsbusted

Rarely a week goes by when a nervous financial professional doesn’t reach to me for help with a last-minute guest column for the business media. With a deadline bearing down, the thrill of being a guest contributor has been replaced by the anxiety of “what am I going to write about and how will I/we get it done on time!?!”

Inevitably thoughts turn to word count. They’re typically upset because the editor’s assigned word count is either too long (i.e., how will I ever fill up that much space?) or too short (i.e., how can I jam my entire life’s work into such a tight space?!?!). Ahhhhhh. They joys of being an author.

When it comes to word count, there’s no hard and fast rule for how long a blog post, article, white paper or even a book should be. Don’t believe me? Ask your favorite search engine or AI tool and you’ll see “recommended word counts” ranging from 300 to 2,500 words for blogs and 800 to 5,000 words for articles. That’s not very helpful, is it?

Less is more

At HB, we lean toward the “less is more” approach. But, as Mark Twain famously quipped to a friend: “’I apologize for such a long letter – I didn’t have time to write a short one.’

Twain could get away with that logic because he was one of the greatest authors in our country’s history. So, the short answer is this: If you’re an exceptional storyteller and can keep your prose compelling, go ahead an air it out. But for the rest of us, shorter is generally better as long as you don’t “dumb down” the complex topics you’re frequently asked to write about.

For business and financial topics, we’ve found that 600 to 900 words scores best for blog posts and 1,000 to 1,500 words (including the Key Takeaways) tends to get the most engagement for articles. Most financial editors will assign word lengths in this range. Of course, there are exceptions. Most word processing software generates about 400 words per page, so an ideal blog post is 1.5 to 2 pages and an ideal article is about 2.5 to 4 pages. For white papers and book chapters, we’re seeing that 2,000 to 4,000 words works best (think 5 to 10 Microsoft Word pages).

Here are some tips for keeping concise:

1. Read your work aloud before submitting it for publication. Most people read at 200 to 300 words per minute. So, an 800-word blog post is a three to four minute. A 1,250-word article is about a four to six minute read. If someone was listening to your piece on their headphones, could you hold your interest for that long? Does it seem to be dragging anywhere? Are you being redundant or vague? These are clues to where you could tighten up or cut.

2. Use short sentences. If you see any instances in which your sentences are more than two lines long, that’s a likely sign of a run-on sentence. Break your prose into shorter more digestible chunks of information, especially if you’re writing online. It’s okay to start sentences with “determiners” such as “And” , “But” and “So” these days. Your high school English teacher would be horrified, but I’ll write you a note to exempt you. Your readers will thank you, too.Here’s a recent example from one of our clients:

ORIGINAL (one sentence, 65 words): “The sliding scale depends on which of the four “pools” your business falls into, but for many of you, the schedule starts at 40% of cost in the first year the equipment is placed in service; rises to 56% in Year-2, and then declines steadily from 42% in Year-3, all the way down to 18%, and Year-6 and to 15% in Year 7 and beyond.”

REVISED: (4 sentences, 53 words total) The sliding scale depends upon which of the four tiers your business belongs. The schedule starts at 40% of cost in the first year your equipment is placed in service. But the rate rises to 56% in Year-2. Then it declines steadily from 42% in Year-3 to 15% in Year 7 and beyond.

3. Tell ‘em times 3. As my old boss at the AICPA used to tell us before every presentation, make sure you get three things across to your audience:
   a) You tell ‘em what you’re going to tell ‘em (INTRO).
   b) Then you tell ‘em (MAIN BODY).
   c) Then you ‘em what you just told ‘em (CONCLUSION).

Same goes for your written communication.

4. Key Takeaways. Whether you call them Key Takeaways, Hot Takes, Key Learnings, Summary Bullets or simply Takeaways, those hardworking bullet points at the top of your content should provide readers with an instant summary of what they will learn from you. Here’s more on Key Takeaways.
5. Call to action. You don’t need to overwhelm readers with everything you know about a topic. Financial professionals frequently suffer from Smartest Kid in the Class Syndrome. You just want to stimulate their interest and have them reach out to you for more information. Make it easy for them to find you to set a time to discuss with you in more detail. Then you can share more of your lifetime body of work.

Conclusion
Just keep these simple tips in mind and you’ll be fine. At the end of the day, it doesn’t matter how well you know the numbers, without a solid command of the English language, you won’t be taken seriously. After all, You’re an Elite Professional; Don’t Sound Like a Jamoke.

#grammar; #wordcount; #businesscommunication; #thoughtleadership

Hard to believe, but the annual NCAA men’s Division I basketball tournament is upon us. The national championship of college basketball (aka “March Madness”) is the ultimate three-week long reality show. Where else can little known universities (aka small cap growth stocks) such as St. Peters, Loyola of Chicago, Murray State, Weber State and Florida Gulf Coast suddenly jump into the national limelight alongside powerhouses Kentucky, Kansas, Duke, Villanova, UCLA, and North Carolina (aka the mega cap blue bloods)?

Bracketology is not an exact science

As many of you know, filling out your NCAA tournament brackets can be great for office morale, despite the drop in productivity. It’s not like picking stocks in which there are over 10,000 companies to choose from. There are only 68 teams, playing a total of 67 games. Every team’s record, roster, statistics, and injury status are out in the open. Like the markets, the Vegas oddsmaker instantaneously digest and “price in” all new information that could materially impact the outcome of each game. It’s all publicly available and free of charge.

While an estimated 20 to 30 million people painstakingly fill out their tournament picks every year, there has never been a verified perfect bracket. The closest to perfection came in 2019, when a Columbus, Ohio, resident correctly chose the winners of the first 49 games of the tournament only to see his picks unravel in the third of six rounds. For years, Warren Buffett has offered his employees a $1 billion prize for picking a perfect bracket and he’s never come close to paying out.

So why are we so bad at it?

It turns out our bracket-picking prowess gets clouded by many of the behavioral biases that derail investors: Recency Bias, Confirmation Bias, Following the Herd, Familiarity Bias, the Halo Effect and more. Filling out your brackets is like constructing a diversified investment portfolio. You’re trying to find the right balance between the “safe picks” (the top seeded, blue-chip stocks) and the “upset picks” (the undervalue lower seeds, aka small cap growth stocks) that will earn you bonus points separate you from the other players in your pool.

And that’s where the human mind gets sidetracked by our behavioral biases. Let’s look at some of the most common ones:

Recency Bias. Investors believe that last year’s top performing stocks and funds will repeat their success in the current year. In reality, last year’s top performers are usually in the middle or bottom third of the pack the following year. Remember how well tech stocks did in 2022 or how poorly energy did? What a difference a year makes.

Same goes for March Madness. Last year’s Final Four teams were all blue chip programs that appear in the tournament almost every year. Defending champion, Kansas is back and looking strong. But North Carolina and Villanova didn’t even qualify for the tournament and Duke had to win nine of its final ten gams just to break into the top 20. And what about St. Peters, the tiny (micro-cap) commuter school from Jersey City, NJ that made a Cinderella run into the Elite Eight? The Peacocks didn’t even have a winning record this year and failed to qualify for the NCAA tournament.

Familiarity Bias. It’s amazing how many people pick their alma mater to do well regardless of the team’s record or who else is in its bracket. People also tend to over-pick teams that are in their geographic area because they hear about them all the time on the news, or because many family members are alums. The reciprocal of Familiarity Bias is Unfamiliarity Bias. That’s the tendency to ignore promising investments because you’re not familiar with the company or industry. Same goes for March Madness. West Coast powerhouses UCLA and Arizona are having superb seasons, but because their games are on too late for most East Coast fans, they’re far less likely to make the Final Four in brackets filled out east of the Mississippi. Likewise, West Coast hoops fans are far more likely to overlook UConn and Marquette, even though both programs have been in the national top 10 and make it to the Big Dance almost every year.

Overconfidence Bias is another derailer for both investors and bracket players. Most pool participants have massive confidence is top-ranked teams. Yet, only once in the history of the tournament (2008) have all four No.1 seeds made it to the Final Four. Some years only one of the four No.1 seeds will make it that far—you never know which one.

Anchoring is another common fallacy known to affect millions of investors and NCAA Tournament pickers. It’s the misguided belief that “Duke or Kentucky ALWAYS get to the Final 8” or that “Kansas and Purdue NEVER win the big games” regardless of the team’s record or tournament readiness in a given year. Considering that star players often don’t stay more than one or two years at the elite programs these days, anchoring based on brand name or reputation is even more dangerous today than it was in the past.

Following the Herd. Oddsmakers love it when the American public stampedes over itself crowding into the same bets. Even though history shows all four No.1 seeds almost never make it to the Final Four in the same year, guess which teams have the majority of votes to make it to the Final Four this year: Alabama, Kansas, Purdue and Houston (the four No.1 seeds in 2023). If you’re keeping score at home, three of the four No.1 seeds (Houston, Alabama, and Purdue) have never won a national title. Hmmmn.

The “Halo Effect” comes into play when investors blindly follow the recommendations or investing choices of gurus such as Bill Gross and Warren Buffet. It’s the same when bracket pickers blindly follow the wonky statistical models of KenPom, 538, and RPI, or blindly pencil in the “sleeper” picks of their favorite TV analysts. As with the stock gurus on TV, the picks of the expert hoop heads on TV rarely pan out.

Then there’s the fallacy of “getting back to breakeven” a mental accounting trap that has plagued gamblers and investors alike for centuries. How many times have you held on to a losing stock for years, just waiting for it to get back to the original purchase price before you can convince yourself to sell it? Likewise, how many people keep selecting BYU (30 tournament appearances without a title); Missouri and Xavier (29 appearances without a title), Tennessee (25 appearances without a title); Alabama and Creighton (24 appearances without a title) to advance far in the tourney because they have a national following and win most of their regular season games each year. Then there’s Gonzaga University, formerly a little-known microcap from eastern Washington and now a mighty mega-cap. The Bulldogs have qualified for the NCAA tournament an amazing 24 straight years and have never won fewer than 23 games in a season over that span. They have an impressive 28-5 record this year and are currently seeded No.3. Just about everyone has the Zags penciled in for a deep run in the tournament despite having never won the NCAA championship. EVER.

Conclusion

Whether investing, gambling, or taking part in the friendly office pool, always check your emotions at the door. Working with an objective, independent advisor is one of the best ways we know to prevent your intuitions from causing you to stray from your plan and making costly mistakes you’ll later regret.

Who’s your pick to win it all and why? I’d love to hear from you.

#marchmadness, #behavioralfinance, #bracketsbusted

Ain’t nobody got time for that!

Experts have been warning us about a recession for over a year, but maybe we’re too busy to notice. As  Kimberly “Sweet Brown” Wilkins of viral YouTube fame would say: “Ain’t nobody got time for that.”

The unemployment rate of about 3.7% was at or near a 50-year low. Not only is the job market  healthy, but wages are growing, the quit rate remains at historically high levels, Americans are spending and GDP has recovered strongly from a slow first half of 2022. Business is also good: Companies are largely beating revenue expectations and reporting positive earnings results. And sky-high inflation and gas prices are coming down big time.

We’ll see if this week’s CPI numbers change the mood, but chances are we’re moving in a cautiously optimistic direction.

I know we have an inverted yield curve (again), which many believe is confirmation that a recession is imminent. Yes, it’s true that an inverted yield curve has preceded every U.S. recession since World War II, but about one-third of the time we have an inverted yield curve, a recession DOES NOT follow, as was the case in 2020.

The old saying goes: “Economists have predicted nine of the last five recessions” and maybe all this angst and paranoia about the looming recession is just another “miss.”

“The reason we’re not in a recession is that the labor market still is performing very well in the US economy,” Ken Kim, a senior economist at KPMG, told Insider. “So, people are still finding jobs and getting a paycheck and spending it on goods and services.”

Real personal income excluding payments from the government has been increasing, with four straight months of gains after falling earlier this year. And retail sales during the 2022 Holidays were up a healthy 7.6% despite substantially higher prices.

“Gains in employment, gains in industrial production, gains in income levels, strong nominal sales figures — none of that stuff sounds particularly recessionary to me,” observed Jack Manley, a global market strategist at JPMorgan Asset Management, in a recent Insider interview.

Not your grandfather’s recession

According to the general definition—two consecutive quarters of negative real gross domestic product (GDP) growth —the U.S. entered a very mild recession in the summer of 2022 after recording minus 1.6% GDP growth in Q1 of last year and minus 0.6% in Q2. If it was a technical recession it was arguably short-lived as GDP rebounded +3.2% in Q3 and an estimated +4.1 in Q4.

But we don’t use that recession benchmark anymore. Now it’s the National Bureau of Economic Research (NBER), whose definition of recession—means a significant decline in economic activity across an entire economy — and that lasts more than a few months. So by this gauge as well, were not in a recession in the summer of 2022. Nor are we now.

Reasons for optimism

Yields on U.S. government bonds, which largely reflect investors’ expectations for short-term interest rates set by the Fed, reached their peak last October. Back then, data had yet to show a drop in core goods prices, even as it was showing an acceleration in services inflation. Yields have since come well off their highs, with PCE core goods inflation over the past three recorded months running at an annualized rate of minus 1.9%. Also, last Friday’s strong jobs report included a double dose of good news for investors. While jobs were plentiful, average hourly earnings rose less than expected in December, and also included significant downward revisions to the gains from previous months. That means most people are still working, but wage gains are less likely to trigger crippling inflation.

Conclusion

Bottom line: If you think things are still good and/or trending upward, don’t be afraid to invest, spend, hire and expand. Don’t let the Fed dissuade you from growing your business, pursuing your goals and enjoying life to the fullest. But if you’re convinced the sky is falling – or about to fall–go ahead and hunker down, lay off staff, hoard cash and wait for the recession storm clouds to pass. Just don’t ruin it for the rest of us.

Six months from now, you may enjoy the schadenfreude of telling optimists: “I told you so.” But chances are you’ll be in our rearview mirror, wishing you had taken action when things were still cheap way back in early 2023.

What’s your take? I’d love to hear from you.

#recession, #aintnobodygottimeforthat, #economy, #yieldcurveinversion

By Blaise Mazurkiewicz, guest columnist

According to our firm’s annual CPA/Wealth Advisor Confidence Survey three out of five (63%) respondents believed that financial literacy and awareness has not improved over the past two years. Even more troubling, the data found financial advisors were more pessimistic about the younger generation’s financial future than any other generation.

Why?

As a member of Gen Z, I’m not sure I agree entirely with that assessment. I do agree with the survey findings that our educational system is not doing nearly enough to prepare young people to be financially responsible adults. For instance, the State Department of Education does not require personal finance to be taught in schools unless there is a bill created by a state legislature and passed by the state’s voters.

Case in point: The high school I attended offers a basic one-semester class on financial literacy. I heard the class was okay, but not great. Since the class wasn’t required and I had a heavy academic load and sports commitments every semester, I didn’t take it. In fact, our firm’s report pointed out that less than half of U.S. states require their K-12 students to take a class in personal finance.

Does lack of financial literacy stem from school system neglect?

Absolutely. It’s an issue that needs to be addressed, not only by elementary and secondary schools, but also by colleges and universities. As our firm’s data showed, nearly seven in eight (86%) financial advisors believe that K-12 school, colleges, and universities could collectively make a bigger positive impact on America’s financial awareness and literacy than any other institution in our society – by far. But don’t just take it from me.

“Our school systems haven’t done enough,” agreed Bismaad Gulati, a Fordham University Gabelli School of Business student. “Most of my friends have gone through the same classes I have but aren’t as interested in finance or business as I am.” Gulati told me recently. “I think they’re not as well equipped, which is an obvious issue.”

Although bills have been passed to improve the gap in financial literacy education, it seems like lawmakers haven’t reached a large enough audience to make a significant change so far. As stated in our firm’s report, financial advisors overwhelmingly felt K-12 schools – more than any other institution in our society – could make the biggest impact on America’s financial literacy. Nearly three in five respondents (58%) agreed.

This needs to change.

Owen Brennan, marketing major at the University of Connecticut School of Business recently told me that personal finance classes should NOT be optional and that there should be more of them. “We shouldn’t be expected to fall back on material from our math courses in order to understand what’s going on. At a younger age, and especially in high school, we need somebody to help connect those dots for us,” Added Brennan.

From where I sit, the more dots that younger generations can connect, the better we can see the whole financial picture. Whether it’s student loans, personal investments, or just managing our money. It’s not just about doing the math, but understanding what the clear drivers of our financial well-being are.

What will the future landscape of financial literacy look like, especially for Gen Z and other younger members of society? Gulati said he hopes to see more required personal finance courses in schools, in addition to people taking better advantage of resources available to them. “The internet is a big place and our generation loves to use it,” said Gulati. “I just hope we can collectively figure out how to use it for more than just entertainment and leisure purposes though. If not, that’s sort of on you. Everyone is the master of their own destiny,” he added.

It’s hard to argue with Gulati here. Our generation has more access to (and willingness to use) information than any other generation in history. The way that we can quickly access information explains why overall literacy is higher than before. That being said, hopefully this will translate into higher financial literacy in the near future.

As Brennan said: “ The bright spot comes from our resources. We have access to great tools like YouTube, online courses, and social media influencers that can all help to generate higher levels of literacy,” added Brennan. With these tools in the hands of Gen-Z and other aging generations, the future offers a myriad of opportunities to improve our financial literacy.

How confident are you that the world’s younger generations can improve their financial literacy and overcome the disconnect between financial literacy and education?

Tell me what you think.

Blaise Mazurkiewicz is a marketing associate at HB Publishing & Marketing Company, LLC in Norwalk, CT

# Financialliteracy, #GenZ, #Education, #Finance

When thoughts turn to beaches, beer, barbecues and baseball over the three-day Holiday weekend, it’s easy to lose sight of what Memorial Day is all about. We’ve retail-ized the last weekend in May into the official “kickoff to summer” celebration. In reality, we’re supposed to be honoring U.S. military personnel who have died serving in the armed forces.  Let’s keep that in mind before we get too wrapped up in our social/shopping plans and cursing the sky high gas prices and traffic we’re enduring.

Speaking of perspective, suppose you had a recently retired client couple who finally took that round-the-world trip they’ve been planning for years. Let’s say they departed on Memorial Day 2021 and just came back this weekend, having not checked the news or the Internet during their lengthy sojourn. Looking at their financial statements for the first time in a year, it would probably elicit a yawn, not fear.

How can that be? Check out the chart below: Memorial Day weekend 2021 the S&P 500 was at 4,204. After the close of markets Friday, the S&P was essentially the same: 4,158.

As recently as two weeks ago, this headline came across my newsfeed from a reliable source: The S&P 500 is having its worst year so far in six decades. But, despite all the fear, anxiety and anger these screaming headlines provoke, the markets really haven’t moved much in the big picture. The S&P is essentially unchanged over the past 12 months. What’s more, it’s up a respectable 51% over the past three years (Memorial Day 2019) and up a healthy 72% over the past five years (Memorial Day 2017).

Last week the market danced around bear market territory, defined as a 20% or greater decline from a recent market peak. According to Dimensional Fund Advisors data, there have been at least 15 separate times over the past century when stocks have plummeted 20% or more after setting a recent high. On average, the markets have gained 69.9% five years after hitting bottom. Not too bad.

No one can honestly predict what the next six, twelve or twenty-four months will bring, nor can they explain with confidence how we got to where we are today. Sure, all the doom and gloom predictions about rates hikes, inflation and a recession will be painful in the short-term, but we always find a way to get through those headwinds.

Here’s a prediction from your favorite marathon-running editor: “Slow and steady always wins the race.”

Conclusion

Keep the faith. If you or someone close to you is in the military, we sincerely thank you for your service.

Enjoy your Holiday weekend.

Best, Hank B

Don’t agree? Tell me why.

Here’s how you can support the people of Ukraine

April and National Financial Literacy Month are in the rearview mirror. But that doesn’t we should take our feet off the gas pedal when it comes to addressing the nation’s financial literacy epidemic. According to our annual CPA/Wealth Advisor Confidence Survey, just one-third of financial advisors (38%) believe America’s financial awareness has improved in the two years since COVID surfaced – and they’re particularly worried about the lack of money skills among Millennials and Gen Z.

“One positive that came out of the pandemic is the spotlight on personal finance as an important lifelong skill for everyone,” said respondent Marie Burns a financial advocate. “Now more states than ever are proposing legislation to teach financial literacy in schools.” Once again, our survey respondents felt K-12 schools could make a bigger impact on America’s financial literacy than any other institution in our society.

But who knows how to teach financial literacy?

As a result of the school system’s lack of modernization, survey co-author Valentino Sabuco, Executive Director of The Financial Awareness Foundation, said experts who teach financial literacy are few and far between. “Many teachers unfortunately lack the knowledge themselves on financial literacy,” said Sabuco. “They are ill prepared to teach it to the next generation of students. For those that say they are teaching personal finance, we ask them: ‘Are your materials up to date? Are you touching all the bases?” More often than not, the answer is NO, lamented Sabuco.

Jim Stovall, motivational speaker and author of Millionaire Map told us that there is more information than ever about financial awareness, but we are bombarded with confusing, mixed messages as not all information is accurate and valid. “It’s not a matter of getting information, it’s a matter of getting the right information,” said Stovall.

According to Sabuco, many educators believe financial literacy only deals with savings, budgeting and debt management. They don’t address ways to help students get and stay organized, establish personal and financial goals, save for college or plan for other major expenditures such as cars and house down-payments. “So how do financially illiterate teachers successfully teach personal finance to students?” asked Sabuco.

Dr. Guy Baker, CFP, Ph. D, founder of Wealth Teams Alliance in Irvine, California told me quite simply that most Americans are financially illiterate. “A home economics course should be a core class for high schoolers,” said Baker. “It needs to teach students how to bank, how to save, how to invest and how to use a credit card.” Baker said it should teach them about buying a home vs. renting, buying a car. In other words, “All of the essentials responsibilities that are required to live a productive life.”

Dr. Christopher Sparks, Ph. D, of Academic Investment Management thinks there may be too many constraints on public schools to teach financial literacy effectively and that colleges and universities, may be better equipped. He’d also like to see financial advisors more involved with teaching financial literacy to the masses, but they tend to target those with significant investable assets. “Those who don’t have much to invest are largely ignored,” Sparks observed.

The simple answer to this complex question, said Sabuco, is to provide our youth with the “necessary life skills and problem-solving skills to have the best chance of living a successful life, without outliving their wealth.”

Many of these topics, said Sabuco, are built around the financial elements identified on The FA Infinity Lifelong Learning Symbol shown below

“If all the allied professions (attorneys, CPAs, financial planners, insurance consultants, etc.) took a collaborative and holistic approach, consumers would hear a similar message from several different perspectives and would be more likely to hear the message and act on it,” said attorney Martin M. Shenkman.

Lionel Shipman, a financial and life empowerment professional, told us that financial literacy education should start as early as elementary school. “As children continue their education through middle and high school, their knowledge and experience of financial literacy skills can be broadened and strengthen, preparing them to succeed financially in adulthood,” added Shipman. Ryan Vogel, CFP, Partner, Chief Planning Officer, Novi Wealth in Princeton, New Jersey, agreed. Even among schools that do have financial literacy requirements, Vogel said teaching good lifelong money habits should be part of ongoing curriculum, not a one-off required course like health or driver’s ed.

“In addition to teaching it in high school, there should be a more basic version taught in middle school and some type of financial literacy curriculum in 4th or 5th grade to get them started on the right path,” suggested Vogel.

Conclusion

Bottom line: Everyone from early childhood educators to high schools and university instructors, financial advisors, spiritual advisors and most importantly, parents setting a good example for their children, need to do their part. “We must change the system to help all children from a very young age to develop the financial literacy skill so that it will be part of their lifelong DNA,” said survey respondent Elena Zee, President & CEO Arizona Council of Economic Education (ACEE). Curing the financial illiteracy epidemic in this country takes a village. Are you willing to step up?

Don’t agree? Tell me why.

Here’s how you can support the people of Ukraine

TAGS: #financialliteracy, #financialawareness, #financialeducation, #smartmoney